Frequent changes at the top hurt auto cos in India

That’s not all. When CEOs change, as a natural corollary the top team also sees some change as the new leadership gets their own choice of lieutenants to join the new team.Ketan Thakkar | ETAuto | Updated: August 01, 2016, 12:00 IST

MUMBAI: The top 10 car makers in India have changed their CEOs as many as 24 times to get their strategy right in a tough market, a move that has largely backfired on them.

That's not all. When CEOs change, as a natural corollary the top team also sees some change as the new leadership gets their own choice of lieutenants to join the new team.

As a result over a dozen marketing and sales chiefs have shifted jobs, which has affected the implementation of a consistent strategy, and eventually dealt a blow to sales volumes.

Since the beginning of 2010, Honda Cars India has had five different CEOs, while the likes of Nissan Motor India, General Motors India have had four heads, while Volkswagen, Ford, Fiat and Tata Motors had three, according to an analysis done by ETAuto.

But despite the changes, the annual sales for General Motors, Tata Motors, Fiat and Volkswagen have almost halved, while those of Ford and Nissan's dropped by over 20% in the past five years. To be sure, Honda Cars India has pulled things back though, as its sales grow five times to almost 2 lakh units per annum on the back of new engines and launches, but what's worrying is that the Japanese carmaker has posted consistent decline in sales for the last 8 months.

Tata Motors, in fact never had a CEO for two years, till recently.

However, the top two car makers, Maruti Suzuki and Hyundai, chose to follow a different strategy and didn't tinker with their top deck, and posted good growth during the past five years.

For the record, Indian passenger vehicle market crawled from 2.55 million to 2.78 million units in five years, a compounded annual growth rate of less than 5%. Since the beginning of 2010, Honda Cars India has had five different CEOs, while the likes of Nissan Motor India, General Motors India have had four heads, while VW, Ford, Fiat and Tata Motors had three.

Experts tracking the auto industry said that CEOs, who usually get a tenure of three years, need a longer rope to understand a vast and complex market like India.

"It takes six months for a CEO to understand the country, which is as big as a continent, then another six months to understand the market, so by the time he forms his strategy and gets into execution mode, it is already two and half years and time for him to go, which leaves the local management to fend off bigger challenges," said a senior executive with a Japanese car maker, requesting anonymity.

The average tenure of a CEO at Honda Cars in the past five years was little over a year, whereas at Nissan, GM, Volkswagen, Ford and Tata Motors, it was less than one and half years. But Maruti Suzuki, Hyundai and Renault have made just one or two changes at the top in this time.

More often, spending changes, strategy changes and connect of the market with the regional and HQ also changes.

What's more, it matters a lot how well connected a new CEO is to his global headquarters, which raises the critical question of the need to offer a longer stint to an expat CEO. It is equally important to get in local heads which Renault and Nissan are implementing at present. And thirdly, the need to extend autonomy to the local management, said experts.

When the brand is at an early stage of evolution, there is a need for consistency in a dynamic market. While Honda saw constant change in top leadership, it still managed to do pretty well as it is well established in India, and had products for every CEO to build volumes, said a senior executive of an European car maker, requesting anonymity.

However, Honda Cars too have posted a decline in sales for eight consecutive months. Having taken a late bet on diesel powered cars, the Japanese carmaker has to again revisit the strategy as the mood has changed against diesel due to regulatory and market shifts.

Even CEOs who have come with very rich background and success from other markets have found it tough here, said another executive at an MNC.

"India is not like homogenous countries of Europe -- it has to be viewed differently. The targets are also demanding," he said.

Yoichiro Ueno, the newly appointed MD of Honda Cars India, said the role of the head of operation is to breath fresh air into the company, but the consistency can be achieved by the local management, which is always there.

Experts say organizations today are structured to ensure change of one individual out of a market does not impact business strategy significantly. Most of MNC automakers have mutli layer matrix structures and this enables information sharing and decision making more consultative across the local market, regional office and in decisions of critical strategies global in nature, especially at US and European companies

In theory or ideal world scenario a mechanism to ensure decision making and strategies stand test of time. However In real world dynamism, decisions are impacted based on which layer in the geographic or functional area strong and decisive individuals/ teams calls the shots in a particular time frame.

Maruti Suzuki and Hyundai Motor have created shadow organisation of expats who work in tandem with the local management, and act as messengers to their headquarters to evolve a strategy.

V G Ramakrishnan, MD at a consultancy firm Avanteum Advisors says constant change in CXO’s unsettles teams as the new person brings in their style of functioning, management theories and market perspectives. This can lead to new directions and in complete contrast to earlier policies and approaches followed by the automaker leading to confusion across stakeholders.

“India is a complex market and requires people in leadership position to understand the market well to deliver results. This takes time and in the current scenario of unpredictable and unprecedented policy challenges the job is doubly hard,” added Ramakrishnan.

A spokesperson of the Volkswagen Group, however, said the company's top management is a strong team with a common vision and appropriate understanding of the group's overall strategy and hence "management changes are made keeping in mind the overall strategy, even if each individual brings his or her personal management style".

GM India spokeswoman also said that the processes and services are not dependent on a single person or leader, they are global in nature and could be carried forward seamlessly with the intention of keeping customers at the centre of everything it does.

An email sent to Ford India, Nissan Motor India did not elicit any response.

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